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August 31, 2021 | SEC Investigating “Gamification and Behavioral Prompts” in Financial Markets
Danielle Park
These obvious admissions are ridiculously overdue, but public comments by the new Securities Exchange Commission (SEC) Chair Gary Gensler offer a glimmer of regulatory hope.
Gensler admitted this week that payment for order flow — the back-end payment brokerages receive for directing clients’ trades to market makers — has “an inherent conflict of interest” and that banning the controversial practice is “on the table.”
Shares of the ironically named customer-abusing-trading platform Robinhood tumbled on the news. Still, the implications are far-reaching: most major brokerages now collect billions selling their customer orders to predatory trading firms.
The Securities and Exchange Commission also said Friday it is stepping up its inquiry into so-called gamification and behavioral prompts used by online brokerages and investment advisors to prod people to trade more stocks and other securities, adding:
“investors can be misled by rosy projections of profit by technologies that, in reality, understate the risk of a particular investment or the odds of eye-popping returns”.
Do ya think??
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Danielle Park August 31st, 2021
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